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Clearwater Management Investment Tips: How Do Con Artists Wash Money Through Investments?


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Money laundering is a common phenomenon these days. There are many ways to launder illicit gains. Smurfing, cash smuggling, shell companies, to name a few. However, one oldie but goodie method is investing. Investments offer an excellent cover for illicit money. Con artists often clean their gains this way. So, how do people wash money in investment schemes? Let’s discover.

When Do Illegal Investments Work Best?

The main problem with illegal money is making it clean. You need to introduce it in the legitimate financial system for this. Especially with large amounts, this is hard. You can purchase goods with illegal cash. But this is time-consuming. It can take decades to wash all the money.

Illegal cash owners want quick access to money. The solution is to deposit it in a bank account. However, this is problematic. You can’t go to the bank to simply deposit $1 million. You need to declare the money’s source. Therefore, you first must find one. Investments can represent that source.

Investments work well for significant amounts. However, the best scenario is the following. A part of the money is already clean. This raises less suspicion. Therefore, scammers can continuously pump illegal gains.

Some investment types allow for large transactions. Hence, scammers can move large amounts of money. If part of it is illegal, it won’t raise suspicion. Some examples include:

  • investment funds
  • cryptocurrencies
  • commodities
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Let’s look into each one of these money laundering strategies.

The Most Common Ways to Wash Money

Investment Funds

How do scammers launder money in investments? Investment funds are one solution. These funds include significant money. The sums come from different investors.

Investment managers handle these funds. These people are experienced traders or financial experts. They use the money to buy assets. Then they oversee them. The purpose is to multiply money.

This involves plenty of financial transactions. Investment managers can diversify the assets. For example, they acquire new ones. Some assets may be inefficient. Thus, managers sell them.

The bottom line is that there’s much flexibility. Therefore, these funds can serve as money laundering vehicles. However, this is not the best part. The cherry on top of the cake is the amount. Investment funds sometimes include millions of dollars. This means opportunities to launder hefty gains.

The whole purpose of laundering money through investment funds is to cash out. In some places, this is easier than in others. It all depends on the laws and jurisdiction.

Some states allow third parties to redeem the funds from investments. So, investors can direct the funds into different accounts. They can also register them in the name of third parties. This way, it’s harder for the authorities to detect the fraud. And it enables con artists to continue laundering.

Cryptocurrency Investments

Cryptocurrencies are a haven for money laundering. This is also one of the reasons why authorities want to regulate them. Cryptocurrency investments are complex. The aspect that benefits scammers is anonymity. You don’t need a name or signature to buy and sell assets.

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Everything is digitized. Selling and buying cryptocurrencies comes down to exchanging money with other traders. The whole system is anonymous. You don’t know who you buy from. Similarly, you don’t know who you sell crypto to. You know what assets your account holds. Also, you see its accurate balance. And you’re able to transfer coins at any time.

To create an account on a cryptocurrency platform, you need an ID. However, you don’t need one for every transaction. Also, you can buy crypto from various bank accounts. Do you have an account abroad? It might even hold illegal funds. Yet, you could use it to buy crypto.

Then, you can transfer the money from your crypto wallet to another bank account. In the end, you can withdraw the funds into your bank account. The one issued by your state. How? Declare you’ve made profits from crypto. This is not possible all over the world. However, many countries acknowledge cryptocurrency gains. They also apply taxes to these gains.


Commodities involve more traditional money laundering methods. Some goods never lose value. Gold and gems top the list. By buying these, scammers invest in mobile commodities. Then, they can move these assets to other countries.

There, they fall under a different jurisdiction. Once abroad, they can sell the commodities. Finally, they gain cash.

Alternatively, they can buy commodities from abroad with illegal money. Afterward, they can move it to their jurisdiction. So, there are ways to wash money in traditional investments too.

Bottom Line

In the future, money laundering is more than likely to continue. Our highly digitized world propels the phenomenon further. Con artists constantly discover new ways to wash cash. Money laundering techniques have become more complex. Hence, authorities will have to strive to keep up with the pace.

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Read more investment tips on Clearwater Management Blog.

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